Legal Question in Wills and Trusts in Virginia
My father died a year ago. He left a house (that is upside down by $50k), $200k rollover IRA, and $110k in a checking account. We are, at this point, planning to let the house be foreclosed on. My brother and I have each taken a $100k distribution from the IRA. We have yet to touch the checking account, out of fear. I am the executor. The IRA was payable to us upon death. The checking account, I believe, is JWTROS, and is thus now in my brother and my name. My father has $10's of thousands of dollars in back taaxes owed to the IRS. We know that the IRA is taxable to us as income. What about the checking account? Is it free and clear to us? What is/will/should be done about the back taxes? The last thing we want to do is to take the funds and have the IRS hunting us down for $30k in 5 years. Please assist!
1 Answer from Attorneys
The taxes owed on the checking account funds have presumably already been paid at some point by the three joint account holders who have now been reduced to two with the demise of your father. Therefore, no taxes should be due on these particular funds which now belong to you and your brother.
However, if there are any other assets in your father's estate which do not pass outside of probate(excluding the ones such as you've mentioned which do pass), they should be used to pay all legitimate creditor claims against the estate including your father's back taxes.
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